(1) Indo Flogates, Ltd., And Another v. (2) Straw Products, Ltd., And Another

Patnaik, J.:— Both these writ applications involve common question of law and were, therefore, heard together and are being disposed of by this common judgment. The refusal of the Chief Inspector of Factories and Boilers, Orissa, to renew the factory licence on the ground that application for the same has not been signed by the occupier and the further direction by the said Chief Inspector to submit a fresh application in Form 2 duly filled in and signed by the occupier along with a resolution made and signed by all the Directors nominating one of the Directors as occupier of the factory, is the cause of action for the petitioners in each of the writ applications to approach this Court.

2. The question that requires adjudication is whether in the case of a company only a Director of the company can be nominated as the occupier within the ambit of S. 2(n) of the Factories Act, 1948, as interpreted by the Chief Inspector of Factories, or the person who has the ultimate control over the affairs of the factory would be the occupier and over and above that by legal fiction a Director in certain contingencies can also be held to be an occupier? The answer to this question depends upon the true interpretation of S. 2(n) of the Factories Act, as amended by Act 20 of 1987 together with rules of interpretation of a provsio and the main part of a statute and the legislative history and object of the amendment in question.

3. It would, therefore, be appropriate at this stage to notice the provision of S. 2(n) as it stood prior to its amendment in December 1987, and as it now stands. The pre-amended Act so far as S. 2(n) of the Factories Act is concerned, read as follows:

“Occupier of a factory means the person who has ultimate control over the affairs of the factory, and where the said affairs are entrusted to a managing agent, such agent shall be deemed to be the occupier of the factory;

Provided that …”

4. Though “occupier” of a factory was defined as such in S. 2(n) of the Act, but S. 100 provided for determination of ‘occupier’ in certain-cases and S. 100 as it stood prior to the Amendment Act of 1987 read thus:

“100. Determination of occupier in certain cases:

(1) Where the occupier of a factory is a firm or other association of individuals, any one of the individual partners or members thereof may be prosecuted and punished under this chapter for any offence for which the occupier of the factory is punishable:

Provided that the firm or association may give notice to the Inspector that it has nominated one of its members, residing within India to be the occupier of the factory for the purposes of this chapter, and such individual shall, so long as he is so resident, be deemed to be the occupier of the factory for the purposes of this chapter, until further notice cancelling his nomination is received by the Inspector or until he ceases to be a partner or member of the firm or association.

(2) Where the occupier of a factory is a company, any one of the Directors thereof may be prosecuted and punished under this chapter for any offence for which the occupier of the factory is punishable:

Provided that the company may give notice to the Inspector that it has nominated a director, who is resident within India to be the occupier of the factory for the purposes of this chapter and such director shall, so long as he is so resident, be deemed to be the occupier of the factory for the pusposes of this chapter, until further notice cancelling his nomination is received by the Inspector or until he ceases to be a director.

Provided further that in the case of a factory belonging to the Central Government or any State Government or any local authority the person or persons appointed to manage the affairs of the factory shall be deemed to be the occupier of that factroy for the purposes of this chapter.

(3) Where the owner of any premises or building referred to in S. 93 is not an individual, the provisions of this section shall apply to such owner as they apply to occupiers of factories who are not individuals.”

5. Section 100 was in Chap. X dealing with “Penalties and Procedure.” Thus, while definition of “occupier” in S. 2(n) clearly defined to be the person who has ultimate control over the affairs of the factory, but the statute authorised while levying penalty for contravention of the provisions of the Act to determine who the occupier is and Sub-sec. (1) of S. 100 dealt with a firm or other association of individuals; Sub-sec. (2) of S. 100 dealt with a company and Sub-sec. (3) of S. 100 dealt with the owner of any premises or building.

6. By Act 20 of 1987 several provisions of the Factories Act were amended and S. 2(n) after its amendment is extracted herein below in extenso:

“Occupier of a factory means the person, who has ultimate control over the affairs of the factory;

Provided that:

(i) in the case of a firm or other association of individuals, any one of the individual partners or members thereof shall be deemed to be the occupier;

(ii) in the case of a company, anyone of the directors, shall be deemed to be the occupier;

(iii) in the case of a factory owned or controlled by the Central Government or any State Government, or any local authority, the person or persons appointed to manage the affairs of the factory by the Central Government, the State Government or the local authority, as the case may be, shall be deemed to be the occupier.

Provided further that …”

7. By the Amending Act, S. 100 of the Factories Act has been deleted. The Statement of Objects and Reasons of the amendment in question while introducing the Bill in the Lok Sabha on 2 December, 1986, was to the following effect:

“Statement of Objects and Reasons.

(2) After the last amendment to the Act, there has been substantial modernization and innovation in the industrial field. Several chemical industries have come up which deal with hazardous and toxic substances. This has brought in its train problems of industrial safety and occupational health hazards. It is, therefore, considered necessary that the Act may be appropriately amended, among other things, to provide specifically for the safeguards to be adopted against use and handling of hazardous substances by the occupiers of factories and the laying down of emergency standards and measures. The amendments would also include procedures for siting of hazardous industries to ensure that hazardous and polluting industries arc not set up in areas where they can cause adverse affects on the general public. Provision has also been made for the workers' participation in safely management.

(3) Opportunity has been availed of to make the punishments provided in the Act stricter and certain other amendments found necessary in the implementation of the Act.

(4) The Bill seeks to achieve the above objects.”

In the aforesaid premises, we have to examine the provision in question and interpret the same.

8. According to Sri Das, the learned counsel for the petitioners, the proviso lo S. 2(n) by making one of the Directors lo be the deemed occupier in case of a company does not in any manner make the substantive part of the definition clause otioso and consequently, the actual person who has the ultimate control over the affairs of the factory has lo be the “occupier” and the Chief Inspector of factories has no jurisdiction to reject the application for renewal on the ground that such person is not one of the Directors. It is further submission of Sri Das that not withstanding the fact that a person other than a director is the “occupier” by virtue of having ultimate control over the affairs of the factory, by fiction of law and by deeming provision in certain contingencies, a director of a company shall be deemed to be the occupier and liability can be fastened on the said director and thus by amendment an additional safeguard has been provided for and the substantive part of S. 2(n) has not been made nugatory or redundant.

9. The learned senior standing counsel appearing for the union Government also supports the contention raised by Sri Das and submits that the only harmonious construction that can be made of the substantive part along with the proviso is that both must be allowed lo operate, or else the substantive provision will be rendered* nugatory and that possibly could not have been the legislative intention.

10. Sri Rao, the learned additional Government advocate, appearing for the State Government, on the other hand, submits that a literal meaning should be given to the definition of “occupier” in S. 2(n) and the function of the proviso is lo exclude the case of a company as well as the case of a firm or other association of individuals from the main part of the definition and, therefore, in case of a company, only one of the directors can be nominated to be the occupier vesting ultimate control over the affairs of the factory and that is how the main part and the proviso can be harmoniously construed. According to the learned additional Government advocate, the amendment made in 1987 was intended to make the provision stricter and to make persons with higher position responsible and with that end in view, the Parliament provided that in case of a company, any one of the directors shall be deemed to be the occupier.

11. If the Statement of Objects and Reasons of the Act while introducing the Bill, as narrated earlier, is scrutinized, it does not appear to be the legislative intent that the Parliament made the amendment to permit only a Director in case of a company to be the occupier of factory. That apart, if the construction as put by Sri Das for the petitioners is sustained, then also a director may he brought in by virtue of the deeming provision notwithstanding somebody else has been nominated to be the occupier having ultimate control over the affairs of the factory. A close scrutiny of the amended provisions indicates lhat what was there in S. 100 of the Pre-amended Act has been brought into the definition clause in S. 2(n) by adding the proviso and S. 100 was deleted.

12. This question had come up for consideration recently before a Bench of the Allahabad High Court in the case of Bhatia Metal Containers Private, Ltd., Ghaziabad v. State of Uttar Pradesh [1989 — II L.L.N 736]. The learned Judges cme to hold that in case of a company, one of the directors has to be deemed to be an occupier and it does not permit a company to nominate any body else for the purposes of the Act other than one of the Directors to be the person who had ultimate control over the affairs of the factory. This view undoubtedly supports the contention of Sri Rao, the learned Additional Government advocate appearing for the State of Orissa. But the learned Judges have merely applied the literal meaning of the expression “occupier” and have not considered the functions of a proviso and its interpretation as well as the legislative history and the pre-amended provisions and the provisions as amended by Act 20 of 1987. No reasons have been advanced for the conclusion arrived at by the learned Judges. We therefore, respectfully differ with the aforesaid view of the Allahabad High Court.

13. This question came up for consideration in a batch of writ applications before the Karnataka High Court in the case of W.S Industries (India), Ltd., Bangalore v. Inspector of Factories, Bangalore [1990 — II L.L.N 189]. The learned Judge came to hold that the provio to S. 2(n) of the Factories Act cannot be interpreted to mean that application by a company for registration of its factory or renewal thereof must be signed by a director of the company and such application can be by an officer of the company, even though he may not be the director of the company but on whom the ultimate control vests. The learned Judge further held that in such event persons named in the proviso though not actually “occupiers” and “deemed occupiers” and are accordingly liable depending upon the other provisions of the Act.

14. A Division Bench of the Bombay High Court considered this question in the case of Kirloskar Pneumatic Company, Ltd. v. V.A More [1092 — II L.L.N 979]. The learned Judges of the Bombay High Court after analysing the provisions of S. 2(n) as it stood prior to its amendment and as it now stands after its amendment by Act 20 of 1987 and considering the true functions of a proviso in a statute as well as the legislative intent behind the amendment, came to hold that the amended provisions of the Factories Act do not make any departure from the settled position prior to the amendment that the occupier need not necessarily be a director of the company and the only requirement is that the person to be nominated as the occupier must have the ultimate control over the affairs of the factory and that aspect will have to be determined by the Inspector of Factories with reference to the facts and circumstances of each case. Their Lordships have further obsrved that it is futile to claim that only a director can be an occupier after amendment of the provisions of the Factories Act. While coming to the aforesaid conclusion, the learned Judges relied upon the two decisions of the Supreme Court interpreting S. 2(n) and S. 100 of the Factories Act as they stood prior to the amendment John Donald Mackenzie v. Chief Inspector of Factories, Bihar, Ranchi [1961 (3) F.L.R 342 (S.C)] and M.C Mehta v. Union of India, (1986) 2 SCC 325 : [A.I.R 1987 S.C 982]. We are in respectful agreement with the views expressed by the learned Judges of the Karnataka High Court and Bombay High Court.

15. The main plank of the contention of the learned Additional Government. Advocate appearing for the Chief Inspector of Factories is that in view of the proviso to S. 2(n), the case of a company is taken out of the substantive part of S. 2(n) and, therefore, in respect of a company only one of the Directors can be an occupier and nobody else and to that extent, the main provision in S. 2(n) will have no application. But we are unable to accept this submission made on behalf of the Chief Inspector of Factories. A proviso to a statute has several functions and while interpreting the provisions of a statute and its proviso, the Court should carefully scrutinize and find out what was the real object of the proviso in the statute in question. As has been enumerated by Vepa P. Sarathi in his book Interpretation of Statutes (2nd. Edition), a proviso may be interpreted to mean that but for the proviso the enacting part of the section would have included the subject-matter of the proviso. But a proviso has to be construed with reference to the preceding parts of the clause to which it is appended. It has also been indicated that where the proviso is directly repugnant to a section, the proviso shall stand and can be held to be a repeal of the section as a proviso speaks of the later intention of the makers. It has also been stated that where the section is doubtful, a proviso may be used as a guide to its interpretation, but when it is clear, a proviso cannot imply the existence of words of which there is no trace in the section. The learned author further goes on to state that the proviso is subordinate to the main section and it does not enlarge an enactment except for compelling reasons. It has also been indicated that sometimes an unnecessary proviso is inserted by way of abundant caution. It has further been slated that a construction placed upon a proviso which brings it into general barmony with the terms of section should prevail. It has also been stated that when a proviso is repugnant to the enacting part, the proviso will not prevail over the absolute terms of a latter Act directed to be read as supplemental to the earlier one. Lastly, it has been indicated that a proviso may sometimes contain a substantive provision.

16. Bearing in mind the aforesaid several functions of a proviso and how the proviso can be interpreted in several ways, depending upon the statute in question, as well as the cardinal rules of interpretation of statutes, we would have to examine the provision of S. 2(n) and its proviso. As has been stated earlier, the statement of Objects and Reasons of the amending Act never indicated that the amendment was made to make a director of a company solely responsible for any illegalit or irregularities or any acts or omissions in a factory. It is common knowledge that a director usually does not stay at the situs of the factory and the actual control and management of the factory vests with a person at the suits of the factory and that is why the substantive part of the definition clause of “occupier” in S. 2(n) provides that an occupier means a person who has ultimate control over the affairs of the factory. He may or may not be the owner of the factory. In the case of King v. Dominion Engineering Company [A.I.R 1947 P.C 94], it was held that where the language of the main enactment is clear and unambiguous, a proviso can have no repercussion on the interpretation of the main enactment so as to exclude from it by implication what clearly falls within its express terms. In the case of Abdul Jabar v. State of Jammu and Kashmir [A.I.R 1957 S.C 281]. Section 8(1) and its proviso of the Jammu and Kashmir Preventive Detcetion Act, came up for consideration. The contention of the State Government was that the expression “as soon as may be” not being there in the proviso, it would not be appropriate to import the same where a detention is covered by the proviso. Rejecting the said contention, their Lordships of the Supreme Court held:

“In the first place it is a fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. Therefore, the proviso in question has to be construed harmoniously with the provisions of Sub-sec. (1) to which it is a proviso and the direction not to communicate the grounds should be issued ‘as soon as may be’.”

17. In the case of Corporation of the City of Toronto v. A.G for Canada [(1946) A.C 32], it was held:

“The territory of a proviso, therefore, is to carve out an exception to the main enactment and exclude something which otherwise would have been within the section. It has to operate in the same Held and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment, or to exclude by implication what the enactment clearly says unless the words of the proviso are such that it has that as its necessary effect.”

18. In the case of Commissioner of Income-Tax v. Krishna [A.I.R 1965 S.C 59], their Lordships observed:

“It is not an inflexible rule of construction that a proviso in statute should always be read as a limitation upon the effect of the main section. Generally the natural presumption is that but for the proviso the enacting part of the section would have included the subject-matter of the proviso: but the clear language of the substantive provision as well as the proviso may establish that the proviso is not a qualifying clause of the main provision, but is in itself a substantive provision.”

19. In “Interpretation of Statutes” by Maxwell, it has been indicated that the true principle is that the sound view of the enacting clause, the saving clause and the proviso taken and construed together is to prevail.

20. The Supreme Court in the case of Commissioner of Income-tax v. Indo-Mercantile Bank, Ltd. [A.I.R 1959 S.C 713], considered the functions of a proviso and held:

“The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment a portion which, but for the proviso, would fall within the main enactment. Ordinarily it is foreign to the proper function of a proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment. It is a fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. Therefore, it is to be construed harmoniously with the main enactment. There may be cases in which the language of the statute may be so clear that a proviso may be construed as a substantive clause. But whether a proviso is construed as restricting the main provision or as a substantive clause, it cannot be divorced from the provision to which it stands as proviso. It must be construed harmoniously with the main enactment.”

21. Maxwell in this Interpretation of Statutes (11th. Edition at page 155) observed:

“There is no rule that the first or enacting part is to be construed without reference to the proviso. The proper course is to apply the broad general rule of construction, which is that a section or enactment must be construed as a whole each portion throwing light, if need be on the rest. The true principle undoubtedly, is that the sound interpretation and meaning of the statute, on a view of the enacting clause, saving clause and proviso, taken and construed together, is to prevail.”

22. These being the rules of interpretation and functions of a proviso in interpreting S. 2(n) together with the proviso as it now stands after its amendment by Act 20 of 1987, we have no hesitation to conclude that in defining “occupier” in case of a company, the substantive part of S. 2(n) cannot be thrown to the wind. In other words, a person having the ultimate control over the affairs of the factory, would be the “occupier” and, therefore, the Chief Inspector of Factories has no jurisdiction to to refuse renewal to such a person when such person makes an application. The Inspector, however, will be fully justified to be satisfied as to whether the person applying has the altimate control over the factory or not so as to be an occupier within the main part of S. 2(n) of the Factories Act. In our ultimate analysis, therefore, disagreeing with the views expressed by the Allahabad High Court in 1989 — II L.L.N 736 and agreeing with the views expressed by the Karnataka High Court in 1990 — II L.L.N 189 and Bombay High Court in 1992 — II L.L.N 979 and on making a harmonious interpretation of S. 2(n) and its proviso, it must be held that in the case of a company, a person other than a Director can be an “occupier” within the meaning of S. 2(n) who has the ultimate control over the affairs of the factory and under the proviso in certain contingencies any one of the Directors can be deemed to be the “occupier” and they can be fastened with the liability by virtue of the deeming provision if the situation so warrants. But the Chief Inspector of factories cannot refuse to renew on the ground that the application has been made not by any one of the Directors of the company. In other words, it is not the law that only a Director of the company can be nominated as the occupier under S. 2(n) of the Factories Act. Consequently, the impugned order and/or intimation of the Chief Inspector of Factories is without jurisdiction and the same is accordingly quashed and the Chief Inspector of Factories is directed to consider the application for renewal bearing in mind the law indicated by us and the observations made by us in this judgment.

23. Both these writ applications arc allowed. There will, however, be no order as to costs.

24. S.K Mohanty, J.:— I agree.